Friday, December 26, 2014

A couple of days ago I wrote about three conservative ways to change the ACA that would arguably increase viable options for individuals, insurers and (in one case) employers. It occurs to me that a common thread runs through them all, and that thread may be twined round the heart of a system as invested as ours is in private enterprise, choice and competition.

Here are the three proposals:

1) Allow Cost Sharing Reduction (CSR) subsidies, currently available only with silver plans, to attach also to bronze plans, maintaining a proportionate difference in actuarial value between bronze and silver plans.

2) Allow smaller employers, or possibly even all employers, to fulfill the employer mandate by fully funding employee HSAs linked to HSA-qualified plans available on the ACA exchanges.
3) On a state level, via "innovation waiver," replace the individual mandate with a three-legged stool similar to that proposed by the Coburn-Burr-Hatch outline 'repeal and replace' proposal. That is, a) provide protection against medical underwriting for those who maintain continuous coverage; b) schedule "open seasons" at long intervals (5 years? 3 years?) in which medical underwriting is banned; and c) enroll those who lose their jobs or suffer other loss of income into default catastrophic plans in which the premium equals the subsidy -- that is, into high deductible plans that are essentially free,as bronze plans currently are for many low income buyers, especially older ones. That default option would be more viable, in my view, if CSR attached to the default plan as in proposal #1 above.

The common thread is that each of these proposals is enabled by the plenitude of bronze plans available on the exchanges. I say "plenitude" rather than "prevalence" because only 20% of all ACA private plan buyers in the first open season selected bronze plans. In my view that's fortunate, since bronze plans carried an average per-person deductible of $5,000 in 2014, and in most cases offered very little in benefits before the deductible was reached, excepting the ACAs mandatory free preventive services.

Conservatives like high deductible plans (and should therefore be interested in doing some bronze-smithing) because they incentivize plan holders to restrain medical spending. Reasonable conservatives should acknowledge, however, that deductibles at the bronze level are inappropriate for low-income buyers. The idea is to give people "skin in the game" without forcing them to forgo needed care by flaying them if they play at all.

A Hobson's Choice vs. a real choice

The first two proposals above (or all three of them, if Nos. 1 and 3 are combined) convert high deductible plans for lower income buyers into relatively high deductible plans. That is, they present such buyers with a reasonable tradeoff between premium and out-of-pocket (OOP) cost coverage, a tradeoff proportionate to that faced by higher income buyers. (An employer-funded HSA would make bronze plans viable for a lot of buyers.) The third proposal simply highlights the fact that the 3-legged replacement of the individual mandate might be financially viable, since the ACA already offers free or near-free bronze plans to many low income buyers.* The premise is simply that a free default plan is a lot better than nothing -- particularly if OOP costs are mitigated by CSR.

While I can see the value of all us having some skin in the game when accessing medical treatment, I personally think that the deductibles that we in the U.S. have come to consider normal are insane, a malign consequence of the too-high prices we pay to hospitals, doctors and other medical service providers and piss away on excessive administrative costs. But given the starting point we're at, I do think that everyone for whom private health insurance is deemed affordable (that is, everyone above 138% FPL) should have a viable range of choice between premium and OOP costs.
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* For example: A 57 year-old in Chicago with an income of $21,000 will pay $8 per month for the cheapest bronze plans, with deductible and yearly OOP max $6,000. Two forty-five year-olds in Fargo, North Dakota with an income of $27,000 between them will pay $2 per month for the cheapest bronze - combined deductible and OOP max $12,700. Two 58 year-olds in Philadelphia with a 19 year-old at home and an income of $36,000 will pay $0 for the cheapest bronze, with family deductible at $10,000 and OOP max $13,200.